Why water won’t make it as a major commodity

TheStar Thu, Dec 10, 2020 08:50am - 3 years View Original

The reason ultimately comes down to abundance, price and weight. The commodities that are most important to financial markets have several common characteristics: They’re used globally but produced at only a few locations; they’re relatively scarce, and thus command a steep price; and their value is high relative to their mass, so that even at long distances the cost of freight is a small proportion of the ultimate price.

THERE’S no commodity more central to human activity than the one that makes up 60% of our bodies. So why isn’t water a fixture of financial markets the way gold, crude, copper and soybeans are?

Some investors think it should be. It’s the only asset that Michael Burry, the hedge fund manager played by Christian Bale in “The Big Short, ” still focuses on, if you believe the film’s rather dubious closing sequence.

CME Group Inc is thinking along the same lines, launching futures contracts this week linked to California’s US$1.1bil water market.It’s tempting to believe such a move could make H2O a commodity as central to financial markets as oil, metal and agricultural products – but don’t hold your breath.

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